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Economics of Legalization

Get the PDF Version of this DocumentEconomics of Cannabis Legalization (1994) Detailed Analysis of the Benefits of Ending Cannabis Prohibition

June 1994
by Dale Gieringer, Ph.D.
Coordinator, California NORML

Abstract
The Case For Legalization
The Cheapest Intoxicant
Putting A Value On Cannabis
Computing A Harmfulness Tax
Revenues From Legalization

Abstract
Marijuana legalization offers an important advantage over decriminalization in that it allows for legal distribution and taxation of cannabis. In the absence of taxation, the free market price of legal marijuana would be extremely low, on the order of five to ten cents per joint. In terms of intoxicating potential, a joint is equivalent to at least $1 or $2 worth of alcohol, the price at which cannabis is currently sold in the Netherlands. The easiest way to hold the price at this level under legalization would be by an excise tax on commercial sales. An examination of the external costs imposed by cannabis users on the rest of society suggests that a "harmfulness tax" of $.50 - $1 per joint is appropriate. It can be estimated that excise taxes in this range would raise between $2.2 and $6.4 billion per year. Altogether, legalization would save the taxpayers around $8 - $16 billion, not counting the economic benefits of hemp agriculture and other spinoff industries.

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